Zettelmeyer, F., Morton, F. S., &Silva-Risso, J. (2006). How the Internet lowers prices: Evidence from matched survey and automobile transaction data.

 

Although research has shown that the Internet has lowered the prices in some established industries, little is known about how use of the Internet lowers prices. The authors address this issue for the automobile retailing industry with matched survey and transaction data on 1500 car purchases in California. They show that the Internet lowers prices for two distinct reasons: First, the Internet informs consumers about dealers’ invoice prices. Second, the referral process of online buying services helps consumers obtain lower prices. The combined information and referral price effects are −1.5%, or 22% of dealers’ average gross vehicle profit. The authors also find that the benefits of gathering information differ by consumer type. Buyers who have a high disutility of bargaining but who have collected information on the specific car they eventually purchase pay 1.5% less than they otherwise would. In contrast, buyers who like the bargaining process do not benefit from such information.

 

 

Zettelmeyer, F., Morton, F. S., &Silva-Risso, J. (2006). How the Internet lowers prices: Evidence from matched survey and automobile transaction data. Journal of marketing research, 43(2), 168-181.

    https://doi.org/10.1509/jmkr.43.2.168 

Etkin, J. (2016). The hidden cost of personal quantification. Journal of Consumer Research, 42(6), 967-984.

 

From sleep and energy use to exercise and health, consumers have access to more information about their behavior than ever before. The appeal of personal quantification seems clear. By better understanding our behavior, we can make the necessary changes to live happier, healthier lives. But might the new tools people are using—quantifying life— rob them of some of the benefits of engaging in those activities? Six experiments demonstrate that while measurement increases how much of an activity people do (e.g., walk or read more), it can simultaneously reduce how much people enjoy those activities. This occurs because measurement can undermine intrinsic motivation. By drawing attention to output, measurement can make enjoyable activities feel more like work, which reduces their enjoyment. As a result, measurement can decrease continued engagement in the activity and subjective well-being. Even in the absence of explicit external incentives, measurement itself can thus have similar effects. The findings have implications for measurement’s use, as well as for the psychology of external incentives and intrinsic motivation.

 

 

Etkin, J. (2016). The hidden cost of personal quantification. Journal of Consumer Research, 42(6), 967-984.

https://doi.org/10.1093/jcr/ucv095

 

Kahneman, D., Knetsch, J. L., &Thaler, R. H. (2008). The endowment effect: Evidence of losses valued more than gains.

 

The early empirical evidence of a wide disparity between people’s valuations of gains and losses appeared in results of contingent valuation studies in which respondents were asked both how much they would be willing to pay to prevent a loss of an environmental or other amenity, and what sum they would demand to accept its loss. The results of experiments testing people’s valuations of gains and losses have been consistent in showing that individuals value losses far more than otherwise fully commensurate gains. This leads to smaller gains from trade and fewer voluntary market transactions than would be the case with valuation equivalence. The valuation disparity also suggests greater caution in assessing welfare losses, predicting market outcomes, and may well imply different policy designs.

 

 

Kahneman, D., Knetsch, J. L., &Thaler, R. H. (2008). The endowment effect: Evidence of losses valued more than gains. Handbook of experimental economics results, 1, 939-948.

https://doi.org/10.1016/S1574-0722(07)00100-X

 

Sanfey, A. G., Rilling, J. K., Aronson, J. A., Nystrom, L. E., &Cohen, J. D. (2003). The neural basis of economic decision-making in the ultimatum game. Science, 300(5626), 1755-1758.

 

The nascent field of neuroeconomics seeks to ground economic decisionmaking in the biological substrate of the brain. We used functional magnetic resonance imaging of Ultimatum Game players to investigate neural substrates of cognitive and emotional processes involved in economic decision-making. In this game, two players split a sum of money;one player proposes a division and the other can accept or reject this. We scanned players as they responded to fair and unfair proposals. Unfair offers elicited activity in brain areas related to both emotion (anterior insula) and cognition (dorsolateral prefrontal cortex). Further, significantly heightened activity in anterior insula for rejected unfair offers suggests an important role for emotions in decision-making.

 

 

Sanfey, A. G., Rilling, J. K., Aronson, J. A., Nystrom, L. E., &Cohen, J. D. (2003). The neural basis of economic decision-making in the ultimatum game. Science, 300(5626), 1755-1758.

DOI: 10.1126/science.1082976

 

Norton, M. I., &Goethals, G. R. (2004). Spin (and pitch) doctors: Campaign strategies in televised political debates. Political Behavior, 26(3), 227-248.

Political campaigns frequently set low expectations (using a “low pitch”) in televised political debates to make the later claim that their candidates have done better than expected. The limited credibility of campaign aides, coupled with the fact that perception often confirms expectations, makes this strategy psychologically problematic. In Study 1, when no post-debate information was provided, lowering expectations for a candidate led to lower ratings of performance. In Study 2, when positive feedback (a post-debate “spin”) was provided after a low pitch, participants did rate performance positively, but only when the spin was supplied by a credible media source. The same strategy when used by campaign strategists adversely impacted candidates, leading to lower ratings of debate performance and network coverage.



Norton, M. I., &Goethals, G. R. (2004). Spin (and pitch) doctors: Campaign strategies in televised political debates. Political Behavior, 26(3), 227-248.

https://doi.org/10.1023/B:POBE.0000043454.25971.6a

 

 

 

 

 

McClure, S. M., Li, J., Tomlin, D., Cypert, K. S., Montague, L. M., &Montague, P. R. (2004). Neural correlates of behavioral preference for culturally familiar drinks. Neuron, 44(2), 379-387.

Coca-Cola® (Coke®) and Pepsi® are nearly identical in chemical composition, yet humans routinely display strong subjective preferences for one or the other. This simple observation raises the important question of how cultural messages combine with content to shape our perceptions; even to the point of modifying behavioral preferences for a primary reward like a sugared drink. We delivered Coke and Pepsi to human subjects in behavioral taste tests and also in passive experiments carried out during functional magnetic resonance imaging (fMRI). Two conditions were examined: (1) anonymous delivery of Coke and Pepsi and (2) brand-cued delivery of Coke and Pepsi. For the anonymous task, we report a consistent neural response in the ventromedial prefrontal cortex that correlated with subjects’ behavioral preferences for these beverages. In the brand-cued experiment, brand knowledge for one of the drinks had a dramatic influence on expressed behavioral preferences and on the measured brain responses.

 

 

McClure, S. M., Li, J., Tomlin, D., Cypert, K. S., Montague, L. M., &Montague, P. R. (2004). Neural correlates of behavioral preference for culturally familiar drinks. Neuron, 44(2), 379-387.

 

 

Ersner-Hershfield, H., Wimmer, G. E., &Knutson, B. (2009). Saving for the future self: Neural measures of future self-continuity predict temporal discounting.

 

Despite increases in the human life span, people have not increased their rate of saving. In a phenomenon known as ‘temporal discounting’, people value immediate gains over future gains. According to a future self-continuity hypothesis, individuals perceive and treat the future self differently from the present self, and so might fail to save for their future. Neuroimaging offers a novel means of testing this hypothesis, since previous research indicates that self- vs other-judgments elicit activation in the rostral anterior cingulate (rACC). Using event-related functional magnetic resonance imaging, we predicted and found not only individual differences in rACC activation while rating the current vs future self, but also that individual differences in current vs future self activation predicted temporal discounting assessed behaviorally a week after scanning. In addition to supporting the future self-continuity hypothesis, these findings hold implications for significant financial decisions, such as choosing whether to save for the future or spend in the present.

 

 

Ersner-Hershfield, H., Wimmer, G. E., &Knutson, B. (2009). Saving for the future self: Neural measures of future self-continuity predict temporal discounting. Social cognitive and affective neuroscience, 4(1), 85-92.

https://doi.org/10.1093/scan/nsn042

 

Oishi, S., Schimmack, U., & Diener, E. (2012). Progressive taxation and the subjective well-being of nations. Psychological science, 23(1), 86-92.

Using data from the Gallup World Poll, we examined whether progressive taxation is associated with increased levels of subjective well-being. Consistent with Rawls’s theory of justice, our results showed that progressive taxation was positively associated with the subjective well-being of nations. However, the overall tax rate and government spending were not associated with the subjective well-being of nations. Furthermore, controlling for the wealth of nations and income inequality, we found that respondents living in a nation with more-progressive taxation evaluated their lives as closer to the best possible life and reported having more positive and less negative daily experiences than did respondents living in a nation with less-progressive taxation. Finally, we found that the association between more-progressive taxation and higher levels of subjective well-being was mediated by citizens’ satisfaction with public goods, such as education and public transportation.

 

 

Oishi, S., Schimmack, U., & Diener, E. (2012). Progressive taxation and the subjective well-being of nations. Psychological science, 23(1), 86-92.

https://doi.org/10.1177/0956797611420882

 

Frederick, S., Novemsky, N., Wang, J., Dhar, R., &Nowlis, S. (2009). Opportunity cost neglect. Journal of Consumer Research, 36(4), 553-561.

 

To properly consider the opportunity costs of a purchase, consumers must actively generate the alternatives that it would displace. The current research suggests that consumers often fail to do so. Even under conditions promoting cognitive effort, various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options. Sensitivity to such cues varies with chronic dispositional differences in spending attitudes. We discuss the implications of these results for the marketing strategies of economy and premium brands.

 

 

Frederick, S., Novemsky, N., Wang, J., Dhar, R., &Nowlis, S. (2009). Opportunity cost neglect. Journal of Consumer Research, 36(4), 553-561.

https://doi.org/10.1086/599764